UNIT 7

BUSINESS
SECTION A: ACCOUNTING AND FINANCE
TASK SHEET 1:
Match up the terms on the left with the definitions on the right.
1 bookkeeping A calculating an individual`s or a company`s liability Ior tax
2
accounting B writing down the details oI transactions
(debits and credits)
3 managerial accounting C keeping Iinancial records, recording income and
expenditure, valuing assets and liabilities
4 cost accounting D preparing budgets and other Iinancial reports
necessary Ior management
5 tax accounting E inspection and evaluation oI accounts by a
second set oI accountants
6 auditing F using all available accounting procedures and tricks
to disguise the true Iinancial position oI a company
7 ~creative accounting G working out the unit cost oI products, including materials,
labour and all other expenses
TASK SHEET 2:
Match up these words with the definitions below:
1. a company`s owners
2. all the money received by a company during a given period
3. all the money that a company will have to pay to someone else in the Iuture, including taxes,
debts, interest and mortgage payments
4. the amount oI business done by a company over a year
5. anything owned by a business (buildings, machines, so on) that can be used to produce goods or
pay liabilities
6. the reduction in value oI a Iixed asset during the years it is in use
7. sums oI money owed by customers Ior goods or services purchased on credit
8. sums oI money owed by suppliers Ior purchases made on credit
9. raw materials, work in progress and Iinished products stored ready Ior sale
10. various expenses oI operating a business that cannot be charged to any one product, process and
department
assets depreciation liabilities turnover creditors (GB) or accounts payable (US)
debtors (GB) or accounts receivable (US) overheads (GB) or overhead (US)
revenue or earnings or income shareholders (GB) or stockholders (US)
stock (GB) or inventory (US)
TASK SHEET 3:
ACCOUNTING AND FINANCIAL STATEMENTS

Insert the words in the box above in the gaps of the following text:
In accounting it is always assumed that a business is a 'going concern that it will continue
indeIinitely into the Iuture, which means that the current market value oI its Iixed assets is
irrelevant, as they are not Ior sale. Consequently, the most common accounting system is historical
cost accounting, which records (1) ...... at their original purchase price, minus
accumulated depreciation charges. In times oI inIlation, this understates the value oI appreciating
assets such as land, but overstates proIits as it does not record the replacement cost oI plant or (2)
..... The value oI a business`s assets under historical cost accounting purchase price
minus (3)....... - is known as its net book value.
Company law speciIies that (4) ...... must be given certain Iinancial inIormation.
Companies generally include three Iinancial statements in their annual reports.
The profit and loss account (GB) or income statement (US) shows (5) ......
and expenditure. It usually gives Iigures Ior total sales or (6) ......., and costs and (7)
.......... The Iirst Iigure should obviously be higher than the second, namely there
should be a proIit. Part oI the proIit goes to the government in taxation, part is usually distributed
to shareholders as a dividend and part is retained by the company, Ior it to be able to cope with
possible Iuture threats.
The balance sheet shows a company`s Iinancial situation on a particular date, generally the
last day oI the Iinancial year. It lists the company`s assets, its (8) ...... and shareholders`
Iunds. A business`s assets include (9) ..... and it is assumed that these will be paid.
Liabilities include (10) ....., as these will have to be paid. Negative items on Iinancial
statements, such as creditors, taxation and dividends paid are usually enclosed in brackets.
In accordance with the principle of double-entry bookkeeping (that all transactions are
entered as a credit in one account and as a debit in another), the basic accounting equation is:
Assets Liabilities Owners` Equity
This can be rewritten as:
Assets Liabilities Owners` Equity or Net Assets
This includes share capital (money received Irom the issue oI shares), share premium (GB) or
paid-in surplus (US) (any money realized by selling shares at above their nominal value) and the
company`s reserves (including the year`s retained proIits). Shareholders` equity or net assets are
generally less that a company`s market capitalization (the total value oI its shares at any given
moment, meaning the number oI shares times their market price), because net assets do not record
items such as good will.
The third Iinancial statement has various names, including the source and application of
funds statement and the statement of changes in financial position. This shows the Ilow oI cash
in and out oI the business between balance sheet dates. Sources of funds include trading proIits,
depreciation provisions, sales oI assets, borrowing and the issuing oI shares. Application of funds
includes purchases oI Iixed or Iinancial assets, payment oI dividends, repayment oI loans and
trading losses.
TASK SHEET 4:
Match the definitions with the correct money word:
1. a Iixed amount which is paid, usually monthly, to workers oI higher rank salary
2. an amount oI money which you lend to someone fare
3. a sum oI money which is owed to someone taxes
4. paid while travelling, especially on public transport, buses, trains, etc. loan
5. paid to the government Ior services that the state provides debt
6. paid as a punishment Ior breaking the law cash
7. money paid by a company or the state on your retirement fee
8. money paid by the state, usually to students limon
9. money paid Ior proIessional services, e.g. to a doctor duty
10. money which is in the Iorm oI coins and notes, not cheques interest
11. an amount oI money you receive, usually weekly, in return Ior labour or service grant
12. money paid by divorced Iather to his Iormer wiIe to upkeep his children pension
13. tax on imported articles paid to the customs fine
14. paid at a restaurant aIter eating bill
15. extra percentage paid on a loan wage
TASK SHEET 5:
Give the name for the following definitions:
a) money paid to authors or inventors according to the sales oI their work an a--------
b) a sum oI money used to make more money Irom something that will increase
in value
a m-------
c) the money which a building society or bank lends to someone to buy a house a s----
d) the money that a person pays to an insurance company to protect against loss or
damage
r--------
e) money, usually Irom a relative, to live on a p------
I) an amount oI money, related to the value oI goods sold, which is paid to a
salesman Ior his services
an o--------
g) part- payment oI money which you make to stop the seller Irom selling his
goods to others
m----------
h) part oI the value oI a company that you may buy a l-----
i) money paid by divorced or separated people to support the Iormer husband or
wiIe
an I---------
j) the amount oI money that goes to a shareholder a d-------
k) money received Irom someone in his or her will a d------
l) the amount oI money borrowed Irom a bank, greater than that which is in your
account
c---------
m) an additional payment which is a reward to those who work Ior a company Ior
their extra work
a b----